Wednesday, July 30, 2008

Emerging Market Returns II

I'm trying to see what the returns were in emerging markets pre-1990, and it's very difficult. Campbell Harvey, current editor of the Journal of Finance, wrote a paper in 1995, and had the annualized dollar return for Argentina, from 1976 through 1992, as 72%! That's a cumulative 6000 fold return on one's dollar over that period. Google, one of the great success stories of modern capitalism, grew 'only' 53% annually since it was listed in 2003. Given the market capitalization at the end of his period, this implies that the market was worth about $4 million USD in 1976. However, on his web page, from 1979-1995, he has an arithmetic annualized return of 'only' 42%, and a geometric return of 8%. Clearly, if true (72%?), even referencing the arithmetic average is highly misleading.

Bloomberg has the total USD annualized return since 1992 (as far back as it goes) as -1% annually. Harvey's source in 1995 was the International Finance Corporation, which is part of the World Bank. Most data sources I see start their returns for developed countries in the 1990's, as I think no one wants to be 'Harveyed'.